I think it is fair to say that 2018 was a year to forget for the banks and their shareholders.
Due to the negative impact of the Royal Commission, the downturn in the housing market, and rising wholesale borrowing costs, Australian bank shares were amongst the worst performers on the ASX 200 last year.
So much so, due to their heavy weighting, they contributed significantly to the benchmark index's 6.9% annual decline.
How did the big four perform in 2018?
Here's a quick breakdown on the performances of the big four in 2018 excluding dividends:
The Australia and New Zealand Banking Group (ASX: ANZ) share price lost 15% of its value in 2018. One lowlight for the bank in 2018 was when it revealed at the Royal Commission that it had mis-sold a superannuation product over the counter to customers in breach of financial advice laws.
The Commonwealth Bank of Australia (ASX: CBA) share price fell just over 10% last year, making Australia's biggest bank the best performer of the big four. One incident of note for the bank in 2018 was in June when it agreed to pay $700 million to settle civil proceedings relating to breaches of anti-money laundering and counter-terrorism financing laws.
The National Australia Bank Ltd (ASX: NAB) share price tumbled 19% lower in 2018. In October NAB announced pre-tax customer remediation costs of approximately $435 million. This included costs relating to the fees for no service scandal.
The Westpac Banking Corp (ASX: WBC) share price plunged 20% to make it the worst performing big four bank in 2018. Westpac's shares were hit hard after its CEO Brian Hartzer admitted that it was difficult to quantify how much it would need to repay customers charged for services they never received due to the bank's poor record keeping.
Were the regional banks any better?
Australia's regional banks also struggled in 2018. The Bank of Queensland Limited (ASX: BOQ) share price fell 23% and the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price dropped 7.5%.
Insurance and banking giant Suncorp Group Ltd (ASX: SUN) also underperformed the market with a decline of 7.5%.
Should you buy the banks whilst they are down?
While I think the banks deservedly were sold off in 2018, I feel the level of the selloff has been overdone and has left them trading at attractive levels.
I'm optimistic that once the Royal Commission final report has been released, investors will return to the banks if there are no surprises in the report. This could make it worth considering an investment early this year if you do not already have meaningful exposure to the sector.
